I've also tried the speed hacks on the emulator but that hasn't helped.

I've tried all off the plugins also but no change there.

This is the first time i have used a PS2 emultor, but i have used a PS1 before (psx, espxe) and worked fine.

I''ve also seen people saying that it may be to low a spec to run this emulator...

Games that i have ran on this pc before in the past.

World of warcraft all expansions.
Sims 2 all expansions.
Sims 3 few expansions.
Spore.
Guild wars. 1st I think.
Stronghold.
The Settlers.
i have only ever experienced lag with one of these games and that is WOW and that was only in major cities.

In GSDX make sure you're using GSDX SSSE3 as the plugin (minor speed up) set GSDX to dx11 hardware mode (i believe your card supports DX10, in the event it doesn't, stay with DX9)

set resolution to native.

Then go under speed hacks enable all recommended speed hacks (except MTVU as you only have two cores) see if that doesn't help you. i'm 90% certain your issue is your GPU. but your CPU isn't the best either.. Someone got it running on a C2D @ 3.2ghz without speedhacks so i think we can get somewhere with the above settings